So what with the housing market?

For the last 8 years the price of property have been going up and up and a bit down but soon after more up and up. Until a month ago few were the ones who were expecting that it will go down. Brick and Mortar always go up!

Since the last 2 months the picture has changed totally, so how come people did not see that coming, how come people went that high! how come it did not crash in 2005? Is the slump the consequence of the credit crunch, is it the fault of the American?

All these phenomenons are related. In the USA the end of the house price bubble started the credit crunch, but the credit bubble is responsible for part of the house bubble, and the house bubble is responsible for the credit bubble.

These two market were reinforcing each other on the boom, now they are sinking each other in the slump.

Now for the UK, the banks saw that coming, after the fall of the MBS in USA, bank in Europe started checking their position, step by step incrementing their standard. Preparing for the shock of repossessions and bankruptcies – it is not there yet btw -. The pull out of the 100% , 125% mortgages, is not due to the credit crunch it's due to the realisation by the banks that the risk on these product was heavily underestimated. They won't be able to pay back, they will default more than expected. Therefore more people were able to buy than there should have been, a lot of the demand was created by the underpricing of the mortgages and that lifts house prices. That's probably what happened in 2005, a lot of people were given access to mortgage they should not have. That follow the boom of the MBS.

And that why the government can't save the housing market, because this not the credit crunch that pull mortgages of the market, it's a repricing of the risk, a return to normal condition after the credit bubble.